How the Help to Buy Equity Scheme works
Now approaching now in it’s 8th year of operation, the Help to Buy Scheme allows first time buyers to obtain financial assist to purchase their first home.
Under the help to buy equity loan scheme you can enjoy the benefit of an interest free loan of up to 20% of your purchase price for five years. (40% in London)
In year six interest is charged on your equity loan at a rate of just 1.75%.
This interest free equity loan means you need to put in just 5% cash yourself to leave with a mortgage requirement of as little as 75% of the purchase price of your new property. (55% in London)
If you are wondering if the equity scheme can be of value to you please take a look at our one minute video outlining a help to buy equity scheme example.
In just seventy-five seconds you can obtain an idea of both monthly and capital costs on a typical new home purchase.
Please note that the help to buy equity loan scheme is only available for use on the purchase of selected new build properties.
Help to Buy Scheme – Changes for 2021
There have been a number of changes to the Help to Buy scheme for 2021. These are primarily around Help to Buy Eligibility and Limits.
Help to Buy is now for first time buyers only
Eligibility for the Help to Buy Scheme is now limited to first time buyers only. You can only use the scheme is no applicant has ever previously owned a property in the UK or abroad. This first time buyers restriction also applies to the London Help to Buy Scheme.
Help to Buy – new maximum property price limits for 2021
The maximum property price under the Help to Buy Scheme was £600,000 and that is still the case in London. However, maximum property prices under the scheme across England are now dependent on region as follows:
- North East – £186,100
- North West – £224,400
- Yorkshire and Humber £228,100
- East Midlands – £261,900
- West Midlands – £255,600
- East of England – £407,400
- London – £600,000
- South East – £437,600
- South West – £349,000
Help to Buy – Key eligibility criteria
- All applicants must be first time buyers*
- The new build home purchase must be priced within the regional price caps (see above)
- Any applicants married or in a civil partnership can only apply with their spouse
- A personal connection with the homebuilder can affect your eligibility – please advise if there is such a connection
- Your repayment mortgage must not exceed 4.5 your gross annual income(s)
- You must have a cash deposit of at least 5% of the purchase price (can be your funds or family gift – no loans)
- You can put down a larger deposit but your initial mortgage must be at least 25% of the purchase price
*All applicants must not own a home now, or have owned one in the past anywhere in the World, nor had any form of sharia mortgage finance
London Help to Buy
Given the larger relative purchase costs in London there are improved assistance limits for buyers of new build property within a London Borough. This affords an equity loan of up to 40% of your purchase price.
Buying out your Help to Buy Equity Loan
Your Help to Buy Equity Loan can be bought out in 10% blocks based on the current value of the property.
Bad Credit and looking for a Help to Buy Equity Loan Mortgage
Fortunately, there are now a number of specialist Mortgage Lenders in the Help to Buy Equity Loan mortgage market.
This means that with the right mortgage advice, many borrowers with adverse credit can be assisted under the Help to Buy Equity Loan Scheme.